Move is part of provincial, national drive against excess production capacity
North China's Hebei Province is pursuing a campaign to cut overcapacity in its coal and steel sectors and has ordered these industries to basically withdraw from several of its cities, the Hebei Daily reported on Sunday, citing an internal government meeting held on Friday.
Zhangjiakou, Chengde, Qinhuangdao and Baoding will speed up measures to become "cities without coal mines," according to the report, citing a plan drawn up by the Hebei Development and Reform Commission. No time frame was given.
Local governments are making plans for the total relocation of the steel sector from the cities of Zhangjiakou, Baoding and Langfang.
In total, five cities in Hebei Province will likely bid farewell to coal mines or steel mills, or both.
"Most of the steel mills in these cities are smaller, privately held companies. The measures will clear the cities of less important industries," Wang Guoqing, research director at Beijing Lange Steel Information Research Center, told the Global Times on Sunday.
Wang noted that Zhangjiakou, Baoding and Langfang are close to Beijing, and closing steel mills will bring environmental benefits to the capital, which will hold the 2022 Winter Olympics with Zhangjiakou as a partner city.
As part of the nationwide task of cutting China's excess capacity, Hebei Province proposed to cut 17.26 million tons of iron-making capacity and 14.22 million tons of steel-making capacity before the year end, according to a report from the Hebei Daily in July. In addition, it will close 50 coal mines with production capacity of 13.09 million tons, Hebei Daily reported in August.
Li Chaolin, an independent coal industry analyst in Beijing, said the "coal-free" cities aren't traditionally major coal-producing bases, with the exception of a small number of high-cost coal mines.
"Coal produced from these mines can't compete with low-cost producers from, for example, the Inner Mongolia Autonomous Region," Li told the Global Times on Sunday.
"The closing of these coal mines will contribute to the rebound in coal prices, making the lives of those who still operate better," Li said.
According to a July report by the Hebei Daily, the campaign against overcapacity has progressed well to the extent that the province's steel mills used 13.7 percent less electricity in the first half of this year, compared with a year earlier.
Since the campaign started in 2013 to the end of 2015, Hebei Province has trimmed 33.91 million tons of iron-making capacity and 41.06 million tons of steel-making capacity, the report said.
In the first six months of 2016, the province's equipment manufacturing companies contributed 25.3 percent of Hebei's total industrial value-added output, which was 0.1 percentage point higher than the contribution of iron and steel firms, signifying a breakthrough in the province's industrial restructuring, according to the report.
The steel sector has been the largest contributor for industrial value-added output for over a decade. Hebei produces roughly one-fourth of the total steel and iron made in China, ranking No.1 among the 31 provincial-level regions, said the report.
China has set a target to cut 100 million to 150 million tons of steel capacity over the next five years and 500 million tons of coal capacity over the next three to five years.
The cuts could affect 1.3 million workers in the coal sector and 500,000 workers in the steel sector, according to the Ministry of Human Resources and Social Security in February.
Analysts said Hebei Province can handle the pressure relatively well.
"The majority of employees from the heavy industries can relatively easily find new jobs in the downstream sectors such as processing, logistics and machinery. For instance, a fitter in a steel mill can find a job in a car repair shop with only some degree of assistance," Wang said. "In general, employees from private companies are better prepared to find jobs than their counterparts in State-own companies.
The campaign against overcapacity is in full swing. Northeast China's Heilongjiang Province rolled out a plan to cut steel-making capacity by 6.1 million tons, or one-third of total capacity, by 2020, the Xinhua News Agency reported Sunday.